Tata MF Announces Appointment of Fund Manager for its Schemes

Tata Mutual Fund has appointed Mr. Marzban Irani as the Fund Manager for Tata Liquid Fund, Tata Floater Fund, Tata Income Fund, Tata Short Term Bond Fund and debt portfolios of Tata Young Citizens Fund and Tata MIP Plus Fund with effect from 18 July 2011.

Mr. Marzban Irani has been designated as Senior Fund Manager - Fixed Income from June 2011 and he has eleven years of experience. He is aged 36 years and holds B.Com, PGDBM as his educational qualification.

Source: http://www.adityabirlamoney.com/news/491004/10/22,24/Mutual-Funds-Reports/Tata-MF-Announces-Appointment-of-Fund-Manager-for-its-Schemes

Muthoot Finance to offer loans against gold ETF units

Muthoot Finance Ltd, which claims to be the largest gold finance NBFC in India, on Friday said it will now offer loans against Gold ETF (Exchange Traded Funds) units as security.

Launching the service, Muthoot Finance Ltd Managing Director George Alexander Muthoot told reporters here that the loans against gold ETF units was a scheme through which Muthoot Finance plans to venture into a totally new segment of gold financing, which would not only add value, but also enable the company to service the financial requirements of newer customer segments.

The new scheme would come into force by this month end and would enable the customers to avail finance at the rate of 15 per cent interest against their Gold ETF units to the extent of 85 per cent of the Net Asset Value of ETFs.

Muthoot has tied up with Benchmark, for offering the service, which would be available at 30 branches of Muthoot all over the country in the first phase and would be later extended to all 3,000 of its branches.

He said the company expects to extend up to Rs 1,000 crore worth of loans this fiscal.

Gold ETFs have seen a progressive rise in popularity throughout the country over the past two to three years, attaining a whopping size of over Rs 5,000 crore as of June this year, resulting out of active investments from over 320,000 investors, according to National Stock Exchange Assistant Vice-President and Southern Region Head Sunita Anand.

Benchmark Asset Management Company Pvt Ltd National Head-Sales Anil Desai said the golf ETF loan scheme by Muthoot Finance Ltd would act as a source for investors in gold ETFs to raise funds against their investment units during times of need, instead of selling those units.

Commonly referred as ‘paper gold’, gold ETFs are mutual fund units issued by asset management companies against 99.5 per cent purity physical gold deposited with a SEBI-registered custodian.

Gold ETFs are listed and traded on stock exchanges and can be bought and sold like stocks on a real time basis.

These funds are passively managed and mirror domestic gold prices. By enabling investors to invest in gold without holding it in physical form, gold ETFs offer a rather unique investment opportunity to investors.

Source: http://www.thehindu.com/business/companies/article2229969.ece

Affluent investors flock to structured mutual fund debt schemes promising higher returns.

Structured mutual fund debt schemes that promise to fetch higher returns than plain-vanilla fixed income products are finding many takers among affluent investors and companies nowadays.

These schemes simultaneously invest in banks' one-year certificate of deposits (CD) and high-yield corporate bonds with 15- to 18-month maturity to gain the edge over basic debt products. Fund managers of these schemes, as part of this strategy, lock in a significant portion - about 70%- of the investment portfolio in one-year CDs and the remaining in corporate bonds, including non-convertible debentures.

In this strategy, the CD investments help the fund manager lock-in a higher yield similar to a fixed maturity plan, while the corporate bonds drive the additional returns. At current rates, the investment in one-year CDs could yield as high as 10%. The year when the CD matures, the portion invested in corporate bonds, with 15-18-month maturity, would still carry a residual maturity of 3-5 months.

This is where the fund managers look to cash in. Yields on corporate bonds tend to fall (and prices rise) as the securities near maturity; bond prices and yields move in opposite direction. As bond prices rise, fund managers redeem them, enabling them to gain from the upsides.

"Investors should ideally have oneyear investment horizon for these schemes. This strategy over one year generally cannot go negative even in the worst case scenario," said Sunil Jhaveri, chairman of MSJ Capital , a firm specialising in fund research and advisory.

"Investors have been tired of taking interest rate and duration calls on debt schemes. Products like FMPs or bank fixed deposits are good, but investors lose out on liquidity and prospects of capital gains."

Templeton India Short Term Plan, Pramerica Treasury Advantage Fund and BNP Paribas Bond Fund have adopted this strategy. Investors hope to pocket 10.5-11.25% returns on such structured portfolios.

"Structured short-term open-ended debt funds are for investors who want to gain from higher short-term rates marked at different (type of) debt papers and tenures," says Mahendra Jajoo , CIO, fixed income, Pramerica Mutual Fund .

"Such type of funds are open-ended in nature. They allow investors the flexibility to restructure investments in the wake of direct tax code roll-out next year," Jajoo said.

The government is likely to take away indexation tax benefits from investors under the new DTC rules. Under the current tax regime, if investors buy a 370-day FMP in March, 2011, s/he is eligible to claim benefits of inflation for two years before calculating the capital gains tax liability.

The fund is structured on the premise that short-term rates will decline in a year's time. In the event of an inverted yield curve (that is when long-term debt instruments have a lower yield than shortterm debt instruments of the same credit quality), returns on these funds could fall marginally.

Fund managers claim that they have a back-up plan if the existing strategy for this scheme goes wrong. "We'll be able to realign even if our call on interest rates go a bit out of place. In case the rates go up in the interim, we'll replace the existing constant portfolio with higher-yielding securities. This, in a way, will enhance portfolios returns after one year," Jajoo said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/affluent-investors-flock-to-structured-mutual-fund-debt-schemes-promising-higher-returns/articleshow/9217114.cms

Did you know? | Overseas Investments by resident Individuals

When constructing a portfolio, most investors think of diversification across assets to spread the risk. Another way to do this is to diversify across geography and the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme allows Indian investors to invest abroad.

How much can you invest?

If you are an Indian resident, you can remit or make purchases overseas up to $200,000 (Rs. 89.20 lakh) every financial year. You are not required to repatriate any earnings generated out of investments even if it takes your total investment limit above $200,000. In other words, only the principal you invest is subject to this limit.

The limit is in addition to any amount that you may have carried overseas while travelling, or for studies and medical treatment, but it includes any amount sent overseas as a gift or donation.

There is no limit on the frequency of transactions.

Where can you invest

You can buy and hold immovable property, shares or fixed-income instruments outside India without RBI’s prior approval. You can also invest in mutual fund units and exchange-traded funds.

Where you can’t

What is not permitted is buying and selling of foreign currency convertible bonds issued by Indian companies and foreign exchange trading. The regulation does not allow margin trades; you can buy securities only if there is enough money in your trading account. So you can’t trade in futures and options or short sell a security.

Other limitations

Under this scheme, you can’t invest in Bhutan, Nepal, Mauritius or Pakistan. You also can’t make remittances directly or indirectly to countries identified, from time to time, by the Financial Action Task Force as “non co-operative countries and territories”.

Investing process

Individuals can open and maintain foreign currency accounts with banks outside India for carrying out transactions; you can even link them to your overseas trading account. Your broker can help open the trading account. You start with completing your know-your-client formalities and fill up an account opening form for an overseas trading account. Your broker will then contact the overseas broker partner along with your documentation. The foreign partner will then send account details where the money needs to be sent.

Money is usually sent through a wire transfer, which takes about three-four days. So ensure you have sufficient money in your account if you are investing in markets abroad.

Source: http://www.livemint.com/2011/07/13211449/Did-you-know--Overseas-Inves.html?h=B

The right equity mutual fund

The process of selecting mutual funds has been skewed towards evaluating the historical performance of the scheme, assuming that past performance will be replicated in future results. This is a common approach among investors when it comes to making investments.

This approach does not hold good in the current environment given the multitude of inter-linked global and domestic factors influencing stock performance. The first step for any investor is to decide on the objective of the investment in terms of returns expected and the time at hand. Once this is determined, one needs to gauge the risk taking appetite since investments in stock markets and therefore equity funds may go through ups and downs in the short term. Having worked out one’s own investment goals, choosing a scheme becomes a relatively easy task. Here are some parameters that can help you decide on your mutual fund investment in a more scientific manner:

Investment Objective

Like your own investment objective, every fund has an investment mandate or boundaries within which the fund manager can create his portfolio. One needs to ensure that the two objectives are aligned. Suppose one is not comfortable with having a volatile portfolio from the returns objective. It will then be prudent to avoid a small-cap fund that tends to be volatile in the short to medium term.

Portfolio composition

There is also a need to consider one's current portfolio to ensure that it is well-diversified to shield from any downfall if the underlying sector/ category (that the fund is invested in) were to undergo a correction suddenly. As such, if your portfolio is skewed towards thematic or sector funds such as IT, pharmaceuticals etc. one should consider adding diversified funds.

Risk-adjusted returns

Historical data gives an indication of the fund manager’s ability to deliver additional risk-adjusted returns compared to the benchmark. This indicates risk taken to generate extra return. When you align this parameter with your risk taking ability, it gives you a clear idea whether or not to pursue such investments.

Track record

When it comes to new funds on offer, one cannot analyse the past performance of the scheme. In such instances, you should look at the performance of other funds managed by the asset manager to get a sense of his/her credentials. Even in case of an existing fund, it pays to follow this approach to avoid performance aberrations wherein only a single scheme is doing well in the recent past, thereby reducing the probability of consistent performance.

Fund Corpus

Most investors focus on large corpus funds and think that the large size is an advantage. This is not always the case, and large funds may sometimes be a disadvantage. Consider this example: a large sized mid-cap fund would find it difficult to sell a stock of a small company since there may not be enough liquidity in the market. Similarly, such a fund placing an order for a mid-size stock with limited liquidity will find it difficult as compared to a relatively smaller size fund.

Fund Ratings

Among the recent developments in mutual fund evaluation is the availability of comprehensive fund performance ratings wherein reputed agencies (domestic and international) conduct a comprehensive performance analysis of funds on critical parameters like risk adjusted returns, portfolio composition, asset concentration, liquidity etc. The agency then assigns a specific rating (e.g. 5 star for high performing funds to 1 for poor performing funds). One can look at ratings conducted by agencies like CRISIL, Value Research, Morningstar, Lipper, ICRA.

Source: http://www.indianexpress.com/news/the-right-equity-mutual-fund/815593/0